A lot of speculation. Also, calling the 'Telegraph' reputable is pushing it a bit. Unless you have a very reliable crystal ball I'd suggest sitting back and waiting to see what happens rather than winding everyone up.
Hi Steve, thank you for your comment and for supporting the channel. Haha, fair enough! I have misplaced my crystal ball somewhere! 😅 You're right, no need to get wound up just yet-sometimes it's best to let things unfold and see what actually happens. I’ll put the “speculation machine” on pause for now and enjoy the ride with everyone else. Thanks for the reminder to stay grounded! 😄 That said,, we need to keep aware of potential changes and be nimble enough to react if they are brought in. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi Darren, thank you for your comment and for supporting the channel. The financial community is alight with comments about salary sacrifice and the implications for 9 million people. Will there be a reduction in employer NI rates? Will salary sacrifice be limited/restricted? £16 billion is a lot of money which can be easily collected via PAYE. We set out to promote financial education and part of that is understanding possible pension rule changes so we can react quickly. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi Mike, thank you for your comment and for supporting the channel. If you have a standrd DC workplace pension, this can be adjusted in the employee PAYE. With DB pensions, your pension is calculated based on your salary and your years of service - rather than contributions. Typically, employers make these contributions as part of a long-term funding plan to cover future pension payouts based on the demographics of the scheme - how many active members, how many members retired, average age, dependant benefits being cliamed, inflation expectations and underlying investments and funding of the scheme. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Can imagine that people will look to work 4 days where possible if you get squeezed so much with frozen income tax thresholds and then this, further reducing working hours and therefore Uk efficiency which is already behind the G7 🤦♂️
Hi Ashley, thank you for your comment and for supporting the channel. With frozen income tax thresholds, inflation, and the potential changes to salary sacrifice, it’s no wonder people might consider cutting down their working hours if the financial squeeze keeps tightening. A 4-day work week could become more appealing if the incentive to work full-time just keeps shrinking and many companies are already looking to implement this. But if more people shift to fewer hours, it could hurt overall UK productivity despite claims to the contrary- and we’re already lagging behind other G7 nations in that area. It’s a bit of a vicious cycle: less take-home pay due to tax and NI squeezes could lead to reduced working hours, which then impacts national efficiency. The Government is allegedly focused on UK growth - the jury is out. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Crazy… we change to salary sacrifice, we passed the savings to the employees, our employees will not be so keen to save any more than the minimum. Just madness…
Hi Fen, thank you for your comment and for supporting the channel. You've made the shift to salary sacrifice, passed the savings to employees, and now with potential changes, it could take away a lot of the incentives for them to contribute beyond the minimum. If they’re not seeing a tax or NI benefit, it’s hard to imagine them being motivated to save more. This is basic behavioural finance. The goal should be helping employees secure their futures. You're right-it just doesn’t make sense, and it could backfire by reducing pension savings across the board. Let's hope common sense prevails before this change gets too far! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
My understanding is that 3 possible options are being explored - 1) charge employers the NI - possibly at a reduced level. 2) Charge both employer and employee the NI - again at a poss reduced rate, 3) get rid of salary sacrifice all together. In my opinion option 1 is most likely because options 2 and 3 infringe on Labour's commitment not to increase NI on working people. It also avoids seriously pissing off a lot of working people and given that Labour have already achieved annoying most people in this country and their majority rests on about a third of people voting for them - it would be wise for them to do that!
my employer already doesn’t pass on the NI saving they keep it so wouldn’t affect me. No way they get rid completely - it probably saves them some money from processing tax relief by doing it automatically at PAYE level. Although for higher rate tax payers I bet plenty didn’t realise you can claim the extra 20% back so they lose some there by having it automatically saved
Hi Paul, Thank you for your comment and for supporting the channel and for your insights. I agree that Option 1 is the most likely, but the Secretary Secretary for Buisness & Trade could NOT deny (and dodged the question 3 times) that they would not increase Ni for employers in his interview with Trevor Phillips this weekend. Pensions are considered a low hanging fruit and are easy to tinker with as NI is paid via the PAYE system. Just 16 days to go now :-( Our next video out on Saturday at 5pm is “80% of your success is based on these simple steps.” Please keep watching and subscribe 😊
Would removal of Salary sacrifice also mean that AVC remain a part of the total Salary, meaning anyone using SS on AVC's to keep out of a higher tax bracket will now lose that additional benefit with the whole wage taxed at the higher rate again? At 64 my current AVC's keep me away from the over £50K point and being forced to have a company car for the job role allows me to keep everything in the 20% rate band. Loss of SS will mean looking at leaving the workplace and retiring as it becomes a relative option, meaning theres additional risk for employers of staff losses en mass due to these changes.
Hi Waitlist. thank you for your comment and for supporting the channel. If salary sacrifice (SS) were to be removed, then yes, AVCs (additional voluntary contributions) would be considered part of your total salary. That means anyone using SS to stay under the higher tax bracket would lose that benefit, with earnings above the £50,270 threshold would now be taxed at 40% which is a huge drawback. You can still make pension contributions into a personal pension to lower your income (net relevant earnings) to keep you under the higher rate tax threshold - so all is not lost. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi Boingy, thank you for the comment and for supporting the channel. It is an honour to be mentioned in the same sentence as pensioncraft who I also follow. I don't think I came across as hysterical in the video and I have not seen another channel cover this subject as the news was only a few days old at the time of the video. Let me know if you have any content ideas for future videos. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Just a thought; if the change is to make employer contributions liable to NIC bear on mind that some of the highest employer pension contributions are for those in the public sector on final salary schemes; teachers, NHS, police etc. Seems like turkeys voting for Christmas unless they make public sector employers exempt giving us another two tier system….
My understanding is that in the public sector NI is deducted before pension contributions are taken out - that was my understanding when I worked in the public sector. Employees and their employers therefore didn't avoid paying NI.
@@paulbrightwell3621 that is the case for employee contributions everywhere but I was talking about the employer contributions themselves which are nic free and hence why salary sacrifice saves money. It turns an employee contribution (NICable) into an employer one without any nic. To counteract this route hmrc would have to somehow make the employer contributions liable to nic which would hurt the public sector most as they typically have the highest employer contributions.
Hi Taxman, thank you for your comment and for supporting the channel. The Government is eyeing up a £16 billion windfall which would affect up to 9 million employees. it is important to remember that employees can still make personal pension contributions to lower their net relevant earnings - which can have the same effect but without any potnetial employer NI savings invested into the pension. If they introduce salary sacrifice changes, they will need to make sure that these are applied fairly across the pension landscape. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi Guitar, Thank you for your comment and for supporting the channel. As the Personal Allowance threshold has been until April 2028, millions more will fall into the higher rate catergory at 40%. This is a stealth tax. I remember when a higher rate taxpayer meant something, but there are projected to be 9 million by 2028. This fiscal drag will hold many back and the potnetial removal of salary sacrifice would add further financial pain. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
All this should not be looked at simply in terms of taxes. There is an underlying industrial strategy. Businesses may well reduce benefits/pay rises, however, businesses can offer alternative benefits, such as more structure personal development plans (most companies leave it in the hands of employees). This government's strategy includes getting businesses to invest in growth, so ways to force businesses to invest in new skills for the new digital economy is key element of this government industrial strategy.
Hi Adam, Thank you for your comment and for supporting the channel. I am old enough to have seen Governments run a coach and horses through too much legislation which has cost the taxpayer a lot fo money and increased uncertainty and lowered trust. Where has all that money gone? Shiny new cities around the world but the UK seems to be going backwards? Infrastructure, transport, schools, hospitals, technology... the overall standard of the UK experience is falling (and don't mention the highest tax burden since 1948) Our next video out on Saturday at 5pm is “80% of your success is based on these simple steps.” Please keep watching and subscribe 😊
I think it can also impact on child benefit claims if you’re currently in the £60k-£80k window and are using salary sacrifice to keep within the limit. This effectively would wipe out the benefit. What do you think Simon?
Hi again James, I hope you're well and keping safe. You’re absolutely right - salary sacrifice can definitely affect child benefit claims, especially in the £60k-£80k income range. If you use salary sacrifice to reduce your taxable income and stay below the £50k threshold, it helps you avoid the High Income Child Benefit Charge (HICBC), which claws back some or all of the child benefit. But if salary sacrifice is removed or restricted, it could push your income over that £60k mark, meaning you’d lose some or all of the child benefit. So, it’s not just about pensions and tax efficiency, it could hit things like child benefit too. I will be covering this in the next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
National Insurance is just a general tax these days. It all goes into the same tax revenue pot. There is no direct relationship between state benefits funding and the NI revenue anymore. The label of "national insurance" has been long out of date. It's just a general tax, and the only thing that differentiates is from income tax, is that some people pay it, and some don't (pensioners). But it's just part of general taxation.
Hi, agreed it is just another tax by any other name. it is supposed to be spent accordingly but once the cash enters the Treasury coffers - it is fair game to spent on international aid and never ending wars.
Hi Ethan, thank you for your comment and for supporting the channel. Yes, SMART pensions are a form of salary sacrifice scheme. SMART stands for - Save More And Reduce Tax - pensions work by allowing employees to exchange a portion of their salary for employer pension contributions, which reduces the amount of National Insurance (NI) and tax they pay on their salary. In a SMART pension arrangement, the employee’s gross salary is reduced by the amount they would otherwise contribute to their pension. Instead, the employer makes that contribution on the employee's behalf. This reduces the employee's taxable income and NI contributions, while the employer also benefits by paying less NI. So, if you're participating in a SMART pension, you're indeed using a salary sacrifice arrangement. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Don't think all payroll software providers have been contacted. Those sort of secrets would come out within days at a workplace. Not convinced this could happen within 2 years.
Hi Guitar, thank you for your comment. I am unsure if payrol providers have been contacted - only the major pension providers. The Government will look for a quick win and this will be easy to apply as employees are generally paid montly. I assume that payroll providers will be able to make the changes quickly and at a low cost? Rachel Reeves' comments would indicate the "black hole" needs filling ASAP so whatever changes she has in mind will be in place by April 2025 latest. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi Peter, thank you for your comment and for supporting the channel. If an employer doesn’t currently offer salary sacrifice for workplace pensions, the direct impact of its abolition will be minimal for them and their employees. However, there could be indirect effects to consider. Those employers could face challenges if employees become aware of the benefits they’re missing out on (like tax and National Insurance savings). If salary sacrifice becomes less common or less advantageous, it could level the playing field somewhat, but employees might still expect more competitive pension options in the long run. For employees, those who aren’t in salary sacrifice arrangements wouldn’t see an immediate impact, but they might also miss out on potential savings that those schemes provide. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Hi, They could be limiting the amount that could qualify for salary sacrifice, they may also introduce a pension salary sacrifice NI rate for employers of 8% instead of 13.8% to align with what employees pay? That would also make sense to get some revenue without a huge voter backlash?
Hi Simon great video! I have recently convinced my employer to sacrifice a large part of my Salary, saving me 10% of the contributions as I’m a higher rate tax payer. I know what my employer will do, the will make will undo the changes and go back to paying the minimum. It will cost me thousands, I don’t feel to annoyed about it as I only asked for the sacrifice as I thought it was a way of avoiding NI, that in all honesty should have been paid.
Hi again James and thank you for your comment and kind words. It’s frustrating when you’ve just put a salary sacrifice in place to make the most of your tax savings, only to face the prospect of having those savings taken away if the rules change. It’s even harder when you know your employer might reverse things and go back to the bare minimum contribution. Still, it’s a tough pill to swallow when you’ve worked hard to optimise your finances. You can still contribute into a personal pension of course to lower your net relevant earnings, but you won't benefit from any employer NI savings. Hopefully, whatever changes come will be gradual, and you’ll have time to adapt without too much of a hit to your savings. Just 22 days to go! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
"the government has already contacted the major pension providers regarding the potential abolition" This statement is misleading as it implies the government is seriously considering abolition. It isn't. What the government is doing is taking all proposals and doing the due diligence for all proposals. The government has to look at all proposals put forward even if the Chancellor has no intention whatsoever of touching certain policies, however, the government has to be seen to be considering them all fairly, hence contacting pension providers.
Hi, they have already contacted major pension providers as reported by multiple financial sources. As they were in Opposition for 14 years, i would have thought that all the policy studies and benefit analysis would have already been done to align with their manifesto and their core values? Maybe they just have no idea and are throwing financial excrement against the wall to see what sticks? All alternatives should have already been considered and costed with a clear plan forward. That doesn't appear to be the case.
Hi Grinch, thank you for your comment and for supporting the channel. Ha ha ha, if only it was that easy. Sadly, the bills never seem to chill out and relax so I need to keep working an dbringing you valuable content. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Do lower paid employees ever engage in Salary sacrifice? I only heard of it once I reached a higher salary where I might want to sacrifice salary for tax reasons. Might this shift the burden to those with the broader shoulders? Your video explained the possibility of the change very well. We will have to wait and see what happens at the end of the month.
Can’t sacrifice to take pay below the level of the minimum wage - this often precludes lower paid staff which is ironic as they would feel the greatest benefit proportionately
When you get to lower earners there is a lot less reason and ability to save. You simply can't sacrifice below minimum wage anyway so despite ideally wanting to put money into your pension that incentive is closed off. There is no higher rate tax relief, those on higher incomes can choose to have their pension contribution come from the higher taxed portion of their income rather then the part which is they pay at basic rate. So again an incentive that is not available. You also struggle to find employers which will offer a contribution match or pay more then the minimum 3% on qualified earnings. So thats about 25% of your gross income ignored and 3% on the rest. It works out that if you did 40hr a week on minimum wage your employer would be putting in £36/month and the rest is up to you.
Hi John, thank you for your comemtn and for supporting the channel with your kind words. It’s true that salary sacrifice is more commonly used by higher earners, as they tend to benefit more from the income tax and National Insurance savings. For lower-paid employees, especially those close to the minimum wage, it’s less common, mainly because they can’t sacrifice their salary below the minimum wage threshold. You’re right that if the changes go through, it could shift the burden more onto higher earners, who have “broader shoulders” when it comes to tax and National Insurance contributions. But it's definitely something we’ll have to watch closely. Glad you found the video helpful - let’s see how it all unfolds at the end of the month! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Surely they can't change it this financial year... before then, go back 3 years and backdate payments before then! This would be an administrative nightmare
Hi Greig, thank you for your comment and for supporting the channel. Trying to make changes mid-financial year, especially with something as complex as salary sacrifice would be an administrative nightmare for employers, pension providers, payroll and even HMRC. The logistics of recalculating salary sacrifice contributions, tax, and National Insurance retrospectively could be overwhelming. Plus, it’s unlikely they’d make such a drastic change effective immediately, as that would require significant time for employers to adapt. Typically, major changes like this come with advance notice and transitional arrangements to avoid such chaos. Let’s hope common sense prevails and changes are brought in at the next tax year. That said, changes could easily be made to the PAYE code for a quick win for the Government. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
I remember salary sacrifice on my payslip before I retired. Presumably all this change is being advocated by civil servants who have gold plated DB pensions themselves.
HI again Andy, thank you for your comment and for supporting the channel. Salary sacrifice for pensions got traction in the early 2000's and is now used by an estimated. 9 million employees in the UK. I don't want be accused of being a cynic, but those advocating change in Government rules are civil servants with DB gold plated pensions - paid for the taxpayer no less! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
A lot of speculation. Also, calling the 'Telegraph' reputable is pushing it a bit. Unless you have a very reliable crystal ball I'd suggest sitting back and waiting to see what happens rather than winding everyone up.
Hi Steve, thank you for your comment and for supporting the channel. Haha, fair enough! I have misplaced my crystal ball somewhere! 😅 You're right, no need to get wound up just yet-sometimes it's best to let things unfold and see what actually happens. I’ll put the “speculation machine” on pause for now and enjoy the ride with everyone else. Thanks for the reminder to stay grounded! 😄 That said,, we need to keep aware of potential changes and be nimble enough to react if they are brought in. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
This is nothing more than scaremongering
Hi Darren, thank you for your comment and for supporting the channel. The financial community is alight with comments about salary sacrifice and the implications for 9 million people. Will there be a reduction in employer NI rates? Will salary sacrifice be limited/restricted? £16 billion is a lot of money which can be easily collected via PAYE. We set out to promote financial education and part of that is understanding possible pension rule changes so we can react quickly. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
I cannot understand how this would work. If NI is to be payable on employer contributions how will this work on defined benefit schemes.
Hi Mike, thank you for your comment and for supporting the channel. If you have a standrd DC workplace pension, this can be adjusted in the employee PAYE. With DB pensions, your pension is calculated based on your salary and your years of service - rather than contributions. Typically, employers make these contributions as part of a long-term funding plan to cover future pension payouts based on the demographics of the scheme - how many active members, how many members retired, average age, dependant benefits being cliamed, inflation expectations and underlying investments and funding of the scheme. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Can imagine that people will look to work 4 days where possible if you get squeezed so much with frozen income tax thresholds and then this, further reducing working hours and therefore Uk efficiency which is already behind the G7 🤦♂️
Hi Ashley, thank you for your comment and for supporting the channel. With frozen income tax thresholds, inflation, and the potential changes to salary sacrifice, it’s no wonder people might consider cutting down their working hours if the financial squeeze keeps tightening. A 4-day work week could become more appealing if the incentive to work full-time just keeps shrinking and many companies are already looking to implement this. But if more people shift to fewer hours, it could hurt overall UK productivity despite claims to the contrary- and we’re already lagging behind other G7 nations in that area. It’s a bit of a vicious cycle: less take-home pay due to tax and NI squeezes could lead to reduced working hours, which then impacts national efficiency. The Government is allegedly focused on UK growth - the jury is out. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Crazy… we change to salary sacrifice, we passed the savings to the employees, our employees will not be so keen to save any more than the minimum. Just madness…
Hi Fen, thank you for your comment and for supporting the channel. You've made the shift to salary sacrifice, passed the savings to employees, and now with potential changes, it could take away a lot of the incentives for them to contribute beyond the minimum. If they’re not seeing a tax or NI benefit, it’s hard to imagine them being motivated to save more. This is basic behavioural finance. The goal should be helping employees secure their futures. You're right-it just doesn’t make sense, and it could backfire by reducing pension savings across the board. Let's hope common sense prevails before this change gets too far! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
My understanding is that 3 possible options are being explored - 1) charge employers the NI - possibly at a reduced level. 2) Charge both employer and employee the NI - again at a poss reduced rate, 3) get rid of salary sacrifice all together. In my opinion option 1 is most likely because options 2 and 3 infringe on Labour's commitment not to increase NI on working people. It also avoids seriously pissing off a lot of working people and given that Labour have already achieved annoying most people in this country and their majority rests on about a third of people voting for them - it would be wise for them to do that!
Agree, it definitely will NOT be option 3.
my employer already doesn’t pass on the NI saving they keep it so wouldn’t affect me. No way they get rid completely - it probably saves them some money from processing tax relief by doing it automatically at PAYE level. Although for higher rate tax payers I bet plenty didn’t realise you can claim the extra 20% back so they lose some there by having it automatically saved
Hi Paul, Thank you for your comment and for supporting the channel and for your insights. I agree that Option 1 is the most likely, but the Secretary Secretary for Buisness & Trade could NOT deny (and dodged the question 3 times) that they would not increase Ni for employers in his interview with Trevor Phillips this weekend. Pensions are considered a low hanging fruit and are easy to tinker with as NI is paid via the PAYE system. Just 16 days to go now :-( Our next video out on Saturday at 5pm is “80% of your success is based on these simple steps.” Please keep watching and subscribe 😊
Would removal of Salary sacrifice also mean that AVC remain a part of the total Salary, meaning anyone using SS on AVC's to keep out of a higher tax bracket will now lose that additional benefit with the whole wage taxed at the higher rate again? At 64 my current AVC's keep me away from the over £50K point and being forced to have a company car for the job role allows me to keep everything in the 20% rate band.
Loss of SS will mean looking at leaving the workplace and retiring as it becomes a relative option, meaning theres additional risk for employers of staff losses en mass due to these changes.
Hi Waitlist. thank you for your comment and for supporting the channel. If salary sacrifice (SS) were to be removed, then yes, AVCs (additional voluntary contributions) would be considered part of your total salary. That means anyone using SS to stay under the higher tax bracket would lose that benefit, with earnings above the £50,270 threshold would now be taxed at 40% which is a huge drawback. You can still make pension contributions into a personal pension to lower your income (net relevant earnings) to keep you under the higher rate tax threshold - so all is not lost. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Watch pensioncraft for a much less hysterical view on the budget.
Hi Boingy, thank you for the comment and for supporting the channel. It is an honour to be mentioned in the same sentence as pensioncraft who I also follow. I don't think I came across as hysterical in the video and I have not seen another channel cover this subject as the news was only a few days old at the time of the video. Let me know if you have any content ideas for future videos. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Just a thought; if the change is to make employer contributions liable to NIC bear on mind that some of the highest employer pension contributions are for those in the public sector on final salary schemes; teachers, NHS, police etc. Seems like turkeys voting for Christmas unless they make public sector employers exempt giving us another two tier system….
My understanding is that in the public sector NI is deducted before pension contributions are taken out - that was my understanding when I worked in the public sector. Employees and their employers therefore didn't avoid paying NI.
@@paulbrightwell3621 that is the case for employee contributions everywhere but I was talking about the employer contributions themselves which are nic free and hence why salary sacrifice saves money. It turns an employee contribution (NICable) into an employer one without any nic. To counteract this route hmrc would have to somehow make the employer contributions liable to nic which would hurt the public sector most as they typically have the highest employer contributions.
Hi Taxman, thank you for your comment and for supporting the channel. The Government is eyeing up a £16 billion windfall which would affect up to 9 million employees. it is important to remember that employees can still make personal pension contributions to lower their net relevant earnings - which can have the same effect but without any potnetial employer NI savings invested into the pension. If they introduce salary sacrifice changes, they will need to make sure that these are applied fairly across the pension landscape. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Being a higher rate taxpayer has lots of downsides. This would raise people's taxable pay, and push many into this category 😢
Hi Guitar, Thank you for your comment and for supporting the channel. As the Personal Allowance threshold has been until April 2028, millions more will fall into the higher rate catergory at 40%. This is a stealth tax. I remember when a higher rate taxpayer meant something, but there are projected to be 9 million by 2028. This fiscal drag will hold many back and the potnetial removal of salary sacrifice would add further financial pain. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
All this should not be looked at simply in terms of taxes. There is an underlying industrial strategy. Businesses may well reduce benefits/pay rises, however, businesses can offer alternative benefits, such as more structure personal development plans (most companies leave it in the hands of employees). This government's strategy includes getting businesses to invest in growth, so ways to force businesses to invest in new skills for the new digital economy is key element of this government industrial strategy.
That would suggest the government has a long term plan that it will stick to. It hasn’t and it won’t
Hi Adam, Thank you for your comment and for supporting the channel. I am old enough to have seen Governments run a coach and horses through too much legislation which has cost the taxpayer a lot fo money and increased uncertainty and lowered trust. Where has all that money gone? Shiny new cities around the world but the UK seems to be going backwards? Infrastructure, transport, schools, hospitals, technology... the overall standard of the UK experience is falling (and don't mention the highest tax burden since 1948) Our next video out on Saturday at 5pm is “80% of your success is based on these simple steps.” Please keep watching and subscribe 😊
I think it can also impact on child benefit claims if you’re currently in the £60k-£80k window and are using salary sacrifice to keep within the limit. This effectively would wipe out the benefit. What do you think Simon?
Hi again James, I hope you're well and keping safe. You’re absolutely right - salary sacrifice can definitely affect child benefit claims, especially in the £60k-£80k income range. If you use salary sacrifice to reduce your taxable income and stay below the £50k threshold, it helps you avoid the High Income Child Benefit Charge (HICBC), which claws back some or all of the child benefit. But if salary sacrifice is removed or restricted, it could push your income over that £60k mark, meaning you’d lose some or all of the child benefit. So, it’s not just about pensions and tax efficiency, it could hit things like child benefit too. I will be covering this in the next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
National Insurance is just a general tax these days. It all goes into the same tax revenue pot. There is no direct relationship between state benefits funding and the NI revenue anymore. The label of "national insurance" has been long out of date. It's just a general tax, and the only thing that differentiates is from income tax, is that some people pay it, and some don't (pensioners). But it's just part of general taxation.
Hi, agreed it is just another tax by any other name. it is supposed to be spent accordingly but once the cash enters the Treasury coffers - it is fair game to spent on international aid and never ending wars.
I pay my pension through SMART , is that different?
It's the same thing
Hi Ethan, thank you for your comment and for supporting the channel. Yes, SMART pensions are a form of salary sacrifice scheme. SMART stands for - Save More And Reduce Tax - pensions work by allowing employees to exchange a portion of their salary for employer pension contributions, which reduces the amount of National Insurance (NI) and tax they pay on their salary. In a SMART pension arrangement, the employee’s gross salary is reduced by the amount they would otherwise contribute to their pension. Instead, the employer makes that contribution on the employee's behalf. This reduces the employee's taxable income and NI contributions, while the employer also benefits by paying less NI. So, if you're participating in a SMART pension, you're indeed using a salary sacrifice arrangement. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Don't think all payroll software providers have been contacted. Those sort of secrets would come out within days at a workplace.
Not convinced this could happen within 2 years.
Hi Guitar, thank you for your comment. I am unsure if payrol providers have been contacted - only the major pension providers. The Government will look for a quick win and this will be easy to apply as employees are generally paid montly. I assume that payroll providers will be able to make the changes quickly and at a low cost? Rachel Reeves' comments would indicate the "black hole" needs filling ASAP so whatever changes she has in mind will be in place by April 2025 latest. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Would this impact employers that don’t offer salary sacrifice currently in any way, positive or negative, or their employees? Thanks
Hi Peter, thank you for your comment and for supporting the channel. If an employer doesn’t currently offer salary sacrifice for workplace pensions, the direct impact of its abolition will be minimal for them and their employees. However, there could be indirect effects to consider. Those employers could face challenges if employees become aware of the benefits they’re missing out on (like tax and National Insurance savings). If salary sacrifice becomes less common or less advantageous, it could level the playing field somewhat, but employees might still expect more competitive pension options in the long run. For employees, those who aren’t in salary sacrifice arrangements wouldn’t see an immediate impact, but they might also miss out on potential savings that those schemes provide. I hope that helps. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
The government is NOT looking to abolish salary sacrifice. What the government is considering is lowering the cap on annual pension contributions.
Hi, They could be limiting the amount that could qualify for salary sacrifice, they may also introduce a pension salary sacrifice NI rate for employers of 8% instead of 13.8% to align with what employees pay? That would also make sense to get some revenue without a huge voter backlash?
Hi Simon great video!
I have recently convinced my employer to sacrifice a large part of my Salary, saving me 10% of the contributions as I’m a higher rate tax payer. I know what my employer will do, the will make will undo the changes and go back to paying the minimum. It will cost me thousands, I don’t feel to annoyed about it as I only asked for the sacrifice as I thought it was a way of avoiding NI, that in all honesty should have been paid.
Hi again James and thank you for your comment and kind words. It’s frustrating when you’ve just put a salary sacrifice in place to make the most of your tax savings, only to face the prospect of having those savings taken away if the rules change. It’s even harder when you know your employer might reverse things and go back to the bare minimum contribution. Still, it’s a tough pill to swallow when you’ve worked hard to optimise your finances. You can still contribute into a personal pension of course to lower your net relevant earnings, but you won't benefit from any employer NI savings. Hopefully, whatever changes come will be gradual, and you’ll have time to adapt without too much of a hit to your savings. Just 22 days to go! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
"the government has already contacted the major pension providers regarding the potential abolition"
This statement is misleading as it implies the government is seriously considering abolition. It isn't. What the government is doing is taking all proposals and doing the due diligence for all proposals. The government has to look at all proposals put forward even if the Chancellor has no intention whatsoever of touching certain policies, however, the government has to be seen to be considering them all fairly, hence contacting pension providers.
Hi, they have already contacted major pension providers as reported by multiple financial sources. As they were in Opposition for 14 years, i would have thought that all the policy studies and benefit analysis would have already been done to align with their manifesto and their core values? Maybe they just have no idea and are throwing financial excrement against the wall to see what sticks? All alternatives should have already been considered and costed with a clear plan forward. That doesn't appear to be the case.
Then stop paying into you pensions. Stop working and chill out.
Hi Grinch, thank you for your comment and for supporting the channel. Ha ha ha, if only it was that easy. Sadly, the bills never seem to chill out and relax so I need to keep working an dbringing you valuable content. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Do lower paid employees ever engage in Salary sacrifice? I only heard of it once I reached a higher salary where I might want to sacrifice salary for tax reasons. Might this shift the burden to those with the broader shoulders? Your video explained the possibility of the change very well. We will have to wait and see what happens at the end of the month.
Can’t sacrifice to take pay below the level of the minimum wage - this often precludes lower paid staff which is ironic as they would feel the greatest benefit proportionately
When you get to lower earners there is a lot less reason and ability to save. You simply can't sacrifice below minimum wage anyway so despite ideally wanting to put money into your pension that incentive is closed off.
There is no higher rate tax relief, those on higher incomes can choose to have their pension contribution come from the higher taxed portion of their income rather then the part which is they pay at basic rate. So again an incentive that is not available.
You also struggle to find employers which will offer a contribution match or pay more then the minimum 3% on qualified earnings. So thats about 25% of your gross income ignored and 3% on the rest. It works out that if you did 40hr a week on minimum wage your employer would be putting in £36/month and the rest is up to you.
Hi John, thank you for your comemtn and for supporting the channel with your kind words. It’s true that salary sacrifice is more commonly used by higher earners, as they tend to benefit more from the income tax and National Insurance savings. For lower-paid employees, especially those close to the minimum wage, it’s less common, mainly because they can’t sacrifice their salary below the minimum wage threshold. You’re right that if the changes go through, it could shift the burden more onto higher earners, who have “broader shoulders” when it comes to tax and National Insurance contributions. But it's definitely something we’ll have to watch closely. Glad you found the video helpful - let’s see how it all unfolds at the end of the month! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
Surely they can't change it this financial year... before then, go back 3 years and backdate payments before then!
This would be an administrative nightmare
Hi Greig, thank you for your comment and for supporting the channel. Trying to make changes mid-financial year, especially with something as complex as salary sacrifice would be an administrative nightmare for employers, pension providers, payroll and even HMRC. The logistics of recalculating salary sacrifice contributions, tax, and National Insurance retrospectively could be overwhelming. Plus, it’s unlikely they’d make such a drastic change effective immediately, as that would require significant time for employers to adapt. Typically, major changes like this come with advance notice and transitional arrangements to avoid such chaos. Let’s hope common sense prevails and changes are brought in at the next tax year. That said, changes could easily be made to the PAYE code for a quick win for the Government. Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊
I remember salary sacrifice on my payslip before I retired. Presumably all this change is being advocated by civil servants who have gold plated DB pensions themselves.
HI again Andy, thank you for your comment and for supporting the channel. Salary sacrifice for pensions got traction in the early 2000's and is now used by an estimated. 9 million employees in the UK. I don't want be accused of being a cynic, but those advocating change in Government rules are civil servants with DB gold plated pensions - paid for the taxpayer no less! Our next video out on Saturday is about “How To Pay Less Tax Using Your Pension.” Please keep watching and subscribe 😊